Source: Wall Street News
In March this year, the proportion of subprime borrowers who were overdue for at least 60 days on personal loans and credit card loans was close to the pre-pandemic level. the highest level ever set in the month.
Until the beginning of this month, the Fed’s statement after the monetary policy meeting also said that U.S. economic activity generally slowed in the first quarter, “but household spending and business fixed investment remained strong.” The latest data comes with bad news for U.S. consumer spending.
The share of subprime borrowers among credit card and personal lenders who are at least 60 days past due has risen faster than normal, according to data from consumer credit reporting agency Equifax Inc. The share of such defaulters climbed for eight straight months through March, approaching pre-coronavirus levels. In February, the share of subprime delinquents on auto and rental car loans hit a record high since Equifax records began in 2007.
The figure below shows that according to Equifax statistics, in March this year, 11.3% of borrowers who were overdue for at least 60 days on personal loans and loans with credit lines accounted for 11.1%, and 11.1% of credit card loans were overdue for at least 60 days. These two types of subprime borrowers both accounted for 11.4%. In addition, in March this year, 8.5% of subprime borrowers who were overdue for at least 60 days on their car and rental car loans accounted for 8.5%, which was not only higher than the 7.1% in March 2019, but also close to the previous record of 8.8% set in February this year. %, the second-highest level on record.
The media commented that the Equifax data showed a sign that the healthiest environment for consumer spending in U.S. history is coming to an end.
Subprime borrowers are those with a credit score below 620 who have lower incomes and less personal savings. After the outbreak of the epidemic, the U.S. government introduced fiscal stimulus measures such as direct cash distribution and childcare tax incentives, which improved the financial situation of many households. Accumulate savings.
Now that many pandemic stimulus bonuses have expired and U.S. inflation is at a four-decade high, subprime borrowers are among the most affected consumers. Many families have to choose whether to pay for essential supplies or make monthly loan repayments.
However, some lenders believe that the level of delinquents has only risen after artificially low levels, and that their overall credit conditions are still strong. It is believed that the delinquency rate is still lower than the level in the first quarter of 2020.
Capital One Financial Corp., for example, has reported a year-on-year increase in the delinquency rate of credit card loans that are at least 30 days past due in the first quarter of this year. The bank’s CEO said on the earnings call that credit delinquency rates like these are unnatural and are expected to return to normal levels across the board over time.
Editor/Corrine
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